Friday, 25 January 2008

How Relocalisation May Work

In the last week there has been a flurry of activity over at The Oil Drum on the subject of relocalisation. It began with an essay by Stuart Staniford, titled The Fallacy Of Reversibility which looked at the future prospects for relocalisation. There was a followup piece analysing this essay, mainly aimed at pointing out the holes, called Is Relocalisation Doomed by Sharon Astyk. Green With A Gun has also made some important points on the issue, and certainly a lot easier to follow.

There are now hundreds of comments on the articles, arguing to and fro about their merits and the general future of relocalisation and/or society. It's a lot to wade through, and as with all such commenting, there will never be a consensus. I'm setting out here to put together my thoughts on the matter. These thoughts have kept me awake for the last night or two (or three) so hopefully by setting them down I might get a peaceful night's rest. It is not a quantitative analysis, more a discussion on probable mechanisms that would influence a change in social behaviour to bring about something resembling relocalisation.

To begin, Stuart approaches the subject of whether relocalisation will result from peak oil from the perspective of the supplier. This, I think, is a major flaw in his analysis. Any change does not proceed from one element of a relationship alone, but is the result of the changes in both sides. Supplier and consumer are intimately linked in the case of food supply, and by only looking at the supply side of the equation we are missing at least half of the case.

Boiled down, Stuart is asking "will industrial agriculture become unprofitable due to peak oil?" and unfortunately this is missing the heart of the matter. It's not whether industrial agriculture will be profitable or not that tells us whether relocalisation will work post-peak oil.

The first question should be "what is relocalisation?". This will give us a basis that will allow us to consider the situation in the correct light.

To my mind relocalisation is about sourcing your goods and services in the local economy. An adjunct to that is that the local economy must step up to the plate and supply more goods and services to meet the demands of local consumers. That's it in a nutshell. Keep in mind that supplier and consumer are always intimately linked, one accepts feedback from the other and vice versa.

Nothing in that description implies the continuance or otherwise of industrial agriculture. There is also nothing in it that says industrialised agriculture cannot be used locally. We must insert a caveat, that obviously fuel and parts for the maintenance of machinery are generally not locally available commodities, but a profitable enterprise should be able to deal with those issues.

Relocalisation is more about the spatial relationship with sources of goods than the sources themselves. Sure other issues can be brought into it, such as of ethical production, but these are sideline issues to the central issue of distance. I'm not sure whether it fits the purist relocalisation philosophy, but I believe trade over distance will continue to a degree even in a relocalised area, but that trade wont be in the goods required for our day-to-day survival.

Whilst relocalisation covers things other than food, the focus here is on food, due to the critical part it plays in our continued existence. I believe the ideas expressed for food can be applied to other things with some consideration.

I do appreciate that Stuart was most likely approaching the issue in the fashion he did in order to prove that whilst there was broadscale industrial agriculture there was no impetus for suppliers to turn to any other model of production, but I personally see this as playing around the fringes of the true issues that need to be considered. It's not about whether the supplier needs to turn to some new model of production, but about whether the consumer needs to.

I will touch briefly on a related issue for a moment. There is a lot of talk about calls for large proportions of the population to return to producing their own food as a part of the relocalisation ethos. In Stuart's essay it seemed to be assumed that this would be enacted by a movement of people into the workforce of existing farms, that there would be some economic spur that would drive the farmer to take on physical labourers in place of machinery. I think this is also a misunderstanding of relocalisation. Such a thing would not come to pass at least until it cost more to run machinery than it did to hire labour. Whilst that state of affairs is entirely possible, as Stuart was able to prove it's not likely for some time to come, at least not from a purely economic standpoint in relation to the farmer's bottom line.

Let us consider the consumer, strangely absent from Stuart's analysis, yet central to the reasoning behind relocalisation as a mitigation strategy for peak oil.

Relocalisation is currently a voluntary exercise. It is an activity undertaken by people and communities as a form of insurance. Why insurance? By patronising local suppliers, demand will increase supply, according to economic theory. With an abundance of local suppliers a community or region becomes insulated against shocks to the industrialised mechanisms of goods supply.

I feel this is one of the core paradigms of the relocalisation movement. Forseeing disruptions to stretched supply chains (often global in extent) localities hope to minimise the impact of such disruptions on their daily lives, and therefore upon their chances of continued existence.

The push for relocalisation is not going to come from the bottom line of the grower, but from the consumer. Whilst we have abundant transport fuels to run the current networks everything is okay. As soon as supply declines to any great extent then trouble begins. It does not matter whether a farm in the U.S. is economically viable post-peak oil if the people reliant on it's produce are half a world away in Australia and the goods never arrive because the transport company is unable to purchase fuel.

This highlights the fact that one of the primary motivators is going to be the cost and availability of transport. The cost of getting the goods to market, where this remains possible. Farm gate prices will have an influence on the final price, but these are compounded along with the cost of transport, and the overheads and operating profit of the end marketers, to give a final price. As this goes up, so the affordability of the food decreases.

This leads us to the second factor that needs to be considered when trying to understand what may push people to relocalisation, spending power. Let's consider a "case study" to illustrate some points.

A consumer earns $800 per week working. Of that $800, $200 goes to driving 40km into the nearest town to work on a daily basis. A further $300 is spent on food for the family and the rest goes on mortgage/rent, and sundry other expenses.

As the price of food increases due to the increasing input costs (fundamentally, fuel), we will have inflation (if I understand economic theory correctly!) and the standard approach to combatting inflation is to raise interest rates. So as food costs increase and mortgage/rent payments increase.

Our hypothetical consumer does not want to give up her job, so cutting back on fuel use is not an option. Due to the troubled housing market, moving is not an immediate option. The non-essential sundry expenses go first, and then the budget of food needs to be trimmed. Over time this happens again and again. No more chocolate biscuits, then no more biscuits at all. No more pre-packaged meals. No more soft drink. Before too long the consumer is at a point where they are forced to buy raw foods (if they know of such things, perhaps they have starved for lack of 2 minute noodles by this time) and create their own meals.

The essential message (if sense prevails) is that the consumer gradually moves to a state of producing meals from raw foods. They are now caught between a rock and a hard place. Further increases in price cannot be dealt with by making the diet more raw, they can only be dealt with by reducing the amount of food available.

Now of course there are a multitude of humans, and every one will have a different response to such a situation. Perhaps they turn to charity, move in with relatives, etc. Some though, will have thought ahead and now be growing some proportion of their own food, likely to be mostly vegetables. So begins one aspect of forced relocalisation. Not forced in the sense that everyone will be required to do it by some authority, but forced in that there is an outside factor or influence driving people to it.

The final element of relocalisation to be considered (here at least) is that of the source of food. Currently the majority of people shop in big chain supermarkets. The buying power of these organisations means that food can be brought to the consumer at a price that is often lower than the input costs to the producer. I am personally acquainted with horticulturalists who have left the industry due to the fact that they were getting paid less for their produce than it cost them to grow it.

Now many people would argue that this is a push toward economies of scale, that larger farms will take the place of these smaller, family run enterprises, and one of the central assertions of Stuart's piece is that such large farms will remain profitable throughout.

It is already a fact that our local farmer's market is cheaper than the local supermarket (when I say local, both are 45km away from the village where we reside) The farmer's market is well supported, but only occurs fortnightly.

Again, talking of sensible choices, as fuel prices rise, and following them food prices, we should still see a difference between these two means of obtaining food. Word would get around as people began to search for cheaper sources of food. Patronage at the market would increase, local growers currently supplying to the central markets would hear of this and change the way they do business, moving to sell through the markets. The markets may then run weekly, or daily even, as demand from the consumer spurs the suppliers on.

The cheaper prices at the market still generally mean that the supplier is getting more than when selling to the wholesale market, as long as the farmer is willing to go to such lengths. I imagine that other forms of market selling will come about, such as local agent systems where the fellow who enjoys the hurley burley of the markets collects produce from a group of more socially reticent suppliers and takes it along weekly or daily.

And so relocalisation would come about through the forces applied upon the consumer by the system, and then applied by the consumer back onto the system. As budgets are squeezed by increasing prices consumers move from the ease of driving to the nearest supermarket for pre-packaged meals to sourcing rawer foods closer to home in an attempt to maintain their existence. To be sure this will not happen as a rule, and not be across the board, but it is a mechanism that will result in relocalisation without conscious intent.

As indicated in the beginning, this is a consideration of hypothetical mechanisms that could drive relocalisation, an attempt to look at the factors that were missed in Stuart's essay. It lacks numerical backing, and also suffers for the fact that humans are, if nothing else, an unpredictable species. Still, if the chains of cause and effect outlined here are logically consistent, then it is certainly a possibility, though whether it is a probability remains to be seen. If ever I get a holiday again I may try to put some numbers to it.


green with a gun said...

I think that's an excellent point, looking at relocalisation from the demand-side rather than the supply-side. It's what I was groping at when I talked about high fuel prices making the less-industrial market gardens have an advantage over the distant more industrialised farms, but I didn't express it as clearly as you.

Crazy Mumma said...

Extremely well written Geoff, you've succinctly put into words how I feel about this debate as well, but have struggled to express as I have been mulling it over. If you don't already, you should write professionally.

Oh and by the way, well done on all the progress on your block so far, how exciting! I'll have to content myself with living out my farm dreams vicariously through your blog, LOL.

Cheers, Julie

Polly said...

I've been mulling over Staniford's article too and what you have written is very much what I think but could never have expressed so well. Thank you.